Top 10 Unclaimed Property Tips for Insurance Companies

States are increasing enforcement of unclaimed property statutes. Unlike many state compliance areas, there is little guidance from the U.S. Supreme Court or Congress, leaving a wild west feeling to unclaimed property. To help you get a handle on unclaimed property, Barganier and Associates has prepared this Top 10 tips for insurance companies for handling unclaimed property liabilities.

  1. Prepare for an audit now. States are increasing audits for all types of companies, but specifically the insurance industry. Verus Financial gathered the support of 37 states to initiate multi-state audits of life insurance companies. If your company has not been audited by unclaimed property departments in the past decade, you should expect to be audited within the next several years. If your company has been audited in the past, retain copies of prior year filings at the detail level and understand current reporting process. A documented best practice process and compliance program is the most cost effective defense against a multi state audit.

  2. Know where your unclaimed property resides. Unclaimed property can come in many forms and hide in many places; think of it like corporate rust, it’s everywhere. Continually monitor all bank accounts for outstanding checks as well as policies for unused deposits and credits. This goes for all departments and subsidiaries, including recently acquired subsidiaries. Understand the implications of an acquisition from the unclaimed property perspective.

  3. Monitor types of non-insurance unclaimed property. Make sure your company is reporting other types of unclaimed property other than insurance related proceeds. Payroll, accounts payable, employee benefits and securities are common types of non-insurance related unclaimed property that must be reported.

  4. Follow written unclaimed property policies and procedures. Your company should be systematically handling abandoned property the same way, every time. The only way to ensure this is by creating and then following written policies and procedures. In addition, annual update training is key in the regulatory compliance world.

  5. Expand your document retention period. Audits will go back beyond standard federal income tax based document retention periods. The recent Verus led audit of life insurance companies went as far back as 1992. If you company does not have records, the auditors will use extrapolation methods to estimate your liability. Records are your best defense against the aggressive estimation techniques used by auditors.

  6. Report to the proper state. Every insurance company should be reporting to each state, without using reciprocity rules between the states. This provides a clear audit trail and will reduce non-compliance interest and penalty assessments.

  7. Understand each state’s reporting rules. Unclaimed property laws differ by state, and no two states have identical laws and regulations. Furthermore, there are probably 10-20 significant changes in unclaimed property reporting per filing season. Make sure that you are using the current laws and regulations when you are filing your reports. Also note that insurance companies may have different reporting deadlines than other companies.

  8. Follow each state’s due diligence requirements. Most states require that companies attempt to reach owners of unclaimed property before reporting to the states. By following proper due diligence requirements, states will often indemnify companies for property that has been reported to them. Failure to follow the due diligence requirements may result in penalties and interest for non-compliance.

  9. Use technology to stay in touch with customers, vendors, and others. Proactively seek the owners out to resolve potential liabilities before the properties become dormant and reportable. Collect multiple contact points, including email addresses, so that you can notify customers and agents of unused credits and payees of outstanding checks. Use automatic debits to pay policies. Use ACH to pay vendors and other payees. The proper use of technology can dramatically reduce your potential unclaimed property remittances.

  10. Establish a best practices program. Whether your solution is outsourced or in house, include unclaimed property on your internal audit checklist for annual reviews. Review annual reporting trends for process improvements. If third party vendors are handling any of your disbursements, assign responsibility for the filing liability and/or documentation of the annual filing between the parties in your agreement.

PDF: Top 10 Unclaimed Property Tips for Insurance Companies